Study: HD Radio’s ‘Tepid Growth Story’ - Radio World

Study: HD Radio’s ‘Tepid Growth Story’

Is HD Radio up to the task of helping traditional radio compete with other new media?
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Is HD Radio up to the task of helping traditional radio compete with other new media?

One study suggests the answer is no.


(click thumbnail)Internet radio will boom. Cell phone audio listening is gaining momentum. But HD Radio growth is disappointing. These are among findings of Bridge Ratings, which published this chart as part of a report on “Digital Media Growth Projections” in August. It shows booming expected growth for Internet radio (purple) and wireless Internet (teal) in the coming decade, with terrestrial radio (red) essentially flat, then eroding toward 2020, and HD Radio use bubbling along only near the bottom.

To read the lower grid, choose a media format at left, then read across. For example, “Bridge Ratings estimates that by the start of 2008, HD Radio sales will reach 0.5 million.” HD Radio is in light blue in the chart.

“The entire spectrum of digital audio alternatives, and especially Internet radio and its wireless distribution, continue to represent the biggest challenge to traditional radio,” Bridge concluded.

“Confirming an earlier trend, a rising component of trouble is cell phone activity among all age groups up to 65 years of age. New cell phone capabilities which will turn the mobile phone into a more dynamic part of daily life will potentially surpass Internet radio as the most significant challenger to traditional radio’s time spent listening.

“Based on what we know now,” Bridge stated, “we do not see HD Radio as a significant contributor to boosting listening to terrestrial radio.”

‘Disappointing’

“Projections for HD Radio’s growth is disappointing, as our just-released study on HD vs. Internet radio suggests at this point in time a slower growth curve for the new technology unless the industry can overcome significant consumer resistance due to issues related to the benefits of HD Radio,” it found.

“We have lowered our previous estimate of HD units sold through the end of 2007 to approximately 400,000 and only 2.4 million by 2010 unless marketing, pricing and distribution efforts improve.”

Why isn’t HD Radio catching on?

“The number one response from those who have ‘little or no interest at this time’ continues to be ‘Don’t see a need’ followed by ‘Not aware of its benefits,’” Bridge found. Consumer awareness of HD Radio continues to “grow impressively,” it said, “but consumer interest in owning or listening to HD Radio continues to decline as a function of the general population; 75 percent of the sample now has heard of HD Radio at some time in the past. Only 7 percent expressed that they are very interested in owning HD Radio, down from 9 percent in January of 2007.”

The company concluded that “a solid case of product differentiation or product benefit has not been made by the broadcast community and therefore, those early adopters and innovators who potentially were interested in HD six months ago have, for the time being, moved on to something else.”

Bridge did find that “the combined effect of HD Radio’s roll-up and increasing growth of Internet radio together with a general market malaise are slowing original growth projections for satellite radio.”

Encouraging youth trend?

“Because our predictive polling cannot foresee changes in technological and sociological change, the figures shown do not take these into consideration,” Bridge also noted in regards to its overall numbers. “Traditional analog radio, even with advances such as HD technology, may sustain popular use, especially among older listeners. The maintaining of mass usage numbers, of course, relies on quality of the programming.”

The company’s data indicates that subscribers to satellite radio should reach 23 million by 2010, or 6.7 percent of Americans, and 35 million by 2020. But these projections are down from the company’s earlier estimates of 50 million subscribers and don’t take into consideration a possible merger.

It also found that despite accelerated new car purchase activity, a high percentage of consumers either do not convert free trial subscriptions or do not renew paid subscriptions. The latter percentage is now approaching 55 percent of consumers not renewing or converting.

Traditional radio, meanwhile, is sharing in the Internet radio boom. The percentage of Internet radio listeners who consume simulcasts of terrestrial radio stations is climbing; a quarter of Internet listeners heard at least one terrestrial radio simulcast online in the month prior to the survey; that’s 18 million listeners.

“Assuming technology status quo, we anticipate that by the beginning of 2008 this number will rise to 32 percent and by 2010, 38 percent of Internet radio listeners will spend time with a terrestrial radio simulcast,” though developments in the contentious licensing fight may affect these trends.

The study also relates encouraging news about younger consumers; some in the 12–21 age bracket are rediscovering traditional radio through contemporary music formats such as top 40 and alternative rock.

“What is attracting this young group back is the increasing dedication to new music by some of these stations and a change in the manner the music is being presented on these stations. We are seeing contemporary music stations with a better appreciation of the fact that their most active listeners are very much into ‘music discovery’ and use these radio stations to help filter out uninteresting new music.”

Its earlier research also indicated that radio was benefiting in its pursuit of younger listeners from Internet simulcasting and an “iPod fatigue” effect.

Other findings: Investment and development in WiMax systems will continue in 2007, accelerating out-of-home use of Internet radio. “The negative potential of the new copyright royalty fees on the growth of Internet radio is difficult to project at this time.”

Automotive companies are seeing demand for Internet-capable in-car systems and are moving forward with plans to install Internet-capable boxes in 2007 and ‘08 models, Bridge reported.

“Though initial exposure to this technology will be focused on new cars coming out of Detroit and Japan, plans are unfolding rapidly for after-market installations. This out-of-home and office use coupled with already significant use numbers at home and office are exerting upward pressure on growth for Internet radio listening,” which includes both Internet-only audio as well as radio simulcasts.

Paul McLane

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